Pound-Dollar could face further pressure if UK jobs data disappoints, while Fed rate hike expectations may continue to underpin the US Dollar.
The Pound US Dollar (GBP/USD) exchange rate weakened on Monday as expectations for a Federal Reserve interest rate hike this week boosted the ‘Greenback’.
At the time of writing, GBP/USD was trading at $1.3473, down 0.4% on the week.
Pound to Dollar (GBP/USD): 1.348132 (-0.34%)
Dollar to Yen (USD/JPY): 154.59774 (+0.70%)
DAILY RECAP:
The US Dollar (USD) strengthened on Monday as traders bought the ‘Greenback’ ahead of the Federal Reserve’s interest rate decision on Wednesday evening.
Markets broadly expect the Fed to hike interest rates when it concludes its meeting this week, and these expectations boosted USD’s appeal.
In addition, the safe-haven American currency attracted support amid a souring mood. Escalating tensions in the Middle East rattled markets, after Yemen’s Houthi rebels intensified attacks on Saudi Arabian energy infrastructure.
The Pound (GBP) lacked momentum on Monday as Sterling traders remained cautious ahead of a packed run of UK economic events. With little domestic data on the calendar to drive movement at the beginning of the week, attention quickly turned towards a much busier schedule in the days to come.
Markets were preparing for the release of the latest UK labour market figures, consumer price index, Bank of England (BoE) interest rate decision and retail sales data.
The number of potential catalysts on the horizon left GBP traders hesitant to make significant moves, keeping the Pound subdued as the new week began.
Near-Term GBP/USD Forecast: UK Jobs Data to Dent Sterling?
Looking forward, Tuesday’s UK employment report will put Sterling to its first significant test of the week, with traders looking for clues about the health of the labour market.
Unemployment across the UK is expected to have risen from 4.9% to 5% in the three months to July. At the same time, wage growth including bonuses is forecast to have eased.
A weaker labour market could leave the Pound under pressure, especially with the Bank of England’s interest rate decision only two days away on Thursday.
Meanwhile, US data is thin on the ground on Tuesday. As a result, market risk appetite could drive USD. Could a prevailing risk-off mood support the ‘Greenback’?
Our currency coverage draws on live market data, official economic releases and published bank research.
